KPMG report: Initial impressions of tax proposals in Biden Administration’s budget for FY 2023

Administration's budget with long-term spending and tax plans released

Administration's budget with long-term spending and tax plans released

The Treasury Department today released details of tax proposals in the administration’s budget recommendations for FY 2023.

Treasury’s “Green Book” [PDF 2.45 MB] for FY 2023—General Explanations of the Administration’s Fiscal Year 2023 Revenue Proposals—includes significant new proposals that would add over $2.5 trillion in revenue to the almost $1.5 trillion in revenue projected to be raised by the tax proposals in H.R. 5376, the Build Back Better Act, as passed by the House of Representatives on November 19, 2021 (the House BBBA bill).

The Green Book proposals are intended to work in addition to the separate proposals in the House BBBA bill. Said differently, the proposals released today would work as if the BBBA were already enacted. The one notable exception to this is the BBBA proposal to increase the state and local tax deduction (SALT) cap.

Among the key proposals released today are increases in the corporate, individual, and capital gains rates—among other proposals that were included in last year’s Biden Administration budget recommendations. Today’s Green Book also includes some significant new proposals, including a “minimum income tax on the wealthiest taxpayers” as well as proposals to more closely align the Internal Revenue Code’s international tax provisions to the agreement reached last year on the OECD Inclusive Framework on Base Erosion and Profit Shifting.

  • Read a May 2021 report [PDF 1.4 MB] (116 pages) on last year’s Green Book proposals 
    • Read also "mini-booklets" with descriptions of tax provisions in the administration's FY 2022 budget concerning certain taxpayers, industries or sectors
  • Read a November 2021 report [PDF 2.4 MB] (210 pages) on the House “Build Back Better Act”


The Biden Administration transmitted its FY 2023 budget recommendations to Congress earlier today. Read TaxNewsFlash  

In its recommendations, the administration laid out its annual discretionary spending plan for the fiscal year beginning October 1, 2022, as well as its longer-term plans “to execute a new economic vision, reduce costs for families, reduce the deficit, and build a better America.”  These plans include many of the economic policy proposals from the administration’s “Build Back Better” agenda released last year, as well as some new policy initiatives. 

Descriptions of the tax proposals in the budget recommendations are provided by Treasury in the Green Book.

The administration’s budget proposals are, of course, only recommendations. Congress can accept, reject or modify them as part of the legislative process, as well as add other proposals. It can also choose to offset all or only a part of any spending programs it approves.  Congress also will determine the effective dates of any provisions included in legislation.

KPMG observation

Democratic majorities in the House and Senate are razor thin, leaving little margin for error in enacting complex legislation like the proposals set forth in the Green Book. Efforts to enact major tax changes as part of the BBBA effort stalled out in the Senate last December. Many of the difficulties that derailed the BBBA last year may remain in 2022, making the fate of both the BBBA and the Green Book proposals uncertain this year.

Thus, proposals in the Green Book that lack bipartisan support—or that are part of larger policy initiatives that lack bipartisan support—generally remain very uncertain this year.  

Nonetheless, even if legislation including significant tax law changes ultimately is not enacted this Congress on a partisan basis, it is possible that some relatively noncontroversial revenue provisions might still be included in bipartisan legislation.  For example, cryptocurrency reporting and super-fund provisions were included in bipartisan infrastructure legislation last year.

It is also worth noting that once “new” revenue proposals are raised, they are potentially on the “menu” going forward and may be revisited in the future—even in subsequent Congresses.

What’s new?

The Green Book includes a number of proposals that were not in last year’s budget proposals or in the House BBBA bill.  It also includes some modifications to prior proposals.  

Listed below are some of the significant new proposals.  This list is very general in nature and is not exhaustive.   

  • Modifications to international tax proposals, including replacing the “BEAT” with an “undertaxed profits rule” corresponding to the OECD agreement, a “domestic minimum top-up tax”, and expanding the definition of “foreign business entity” to include taxable units—read TaxNewsFlash for more descriptions of international tax proposals in the Green Book
  • A minimum tax of 20% on total income (generally including unrealized capital gains) on taxpayers with “wealth” of more than $100 million
  • Taxing unrecaptured section 1250 gain as ordinary income
  • Addressing “basis shift” transaction among related partners
  • Various procedural changes, including extending the statute of limitations for unreported gain related to inclusion events for qualified opportunity fund investors
  • Treating a grantor’s payment of income tax attributable to income earned by a grantor trust as a gift to the trust
  • Requiring consistent valuation of promissory notes—if a taxpayer treats any promissory note as having a sufficient rate of interest to avoid the treatment of any foregone interest on the loan as income or any part of the transaction as a gift, that note subsequently must be valued for federal gift and estate tax purposes by limiting the discount rate to the greater of the actual rate of interest of the note, or the applicable minimum interest rate for the remaining term of the note on the date of death
  • Requiring trusts to report the nature and estimated value of their assets on an annual basis (as well as information about the trust’s grantor)
  • Requiring employers to withhold tax on “failed” nonqualified deferred compensation plans
  • Clarifying the tax treatment of “on-demand” pay arrangements
  • Limiting the use of donor advised funds to avoid private foundation payout requirements

KPMG's TaxNewsFlash-Legislative Updates will provide follow-up reports and news of breaking developments.


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